ISAs Are Forever!

Worry no more about the tax-free status of your cash - ISAs are here to stay!

Good news for all ISA savers - the Government has announced they are to stay, indefinitely. Treasury minister Ed Balls made the announcement whilst speaking at the Pep and ISA Managers Association conference, and the news is bound to please a lot of people. What's more, the maxi/mini ISA distinction will also be removed, making the savings scheme simpler for everyone to understand.

ISAs were introduced in 1999 as the government's ways of allowing us to save or invest, tax-free. Anyone aged 16 or over can currently take out a mini-cash ISA and save up to £3,000 in it each year, and anyone over 18 can invest in a mini or maxi share ISA and invest up to £7,000 each year. However, the distinction between mini and maxi ISAs has often been berated for being overly complicated with many fearing this can put people off. Removing this distinction should make ISAs more straightforward and encourage even more of us to save, tax-free.

ISAs are certainly popular - around 16 million of us have accumulated nearly £215 billion in them since they began. However, the Government originally only committed itself to ISAs for ten years (until 2010), which made a number of people wary as to their future. Yesterday's announcement that ISAs are to remain indefinitely as "this Government's primary savings vehicle outside pensions" should certainly make us feel more confident.

What's more, a number of other changes were announced. Anyone with a PEP (Personal Equity Plan), which was a forerunner to the ISA, need worry no more about whether its tax-free status will be maintained as PEPs will now be brought within the ISA wrapper.

And it has been clarified that the Child Trust Fund, introduced in 2005 as the tax-free savings vehicle for all new babies in the UK, will rollover into an ISA upon reaching maturity.

Sadly, Mr Balls made no mention of the ISA limit increasing from its current £7,000 maximum. However, he did state that the overall contribution limit would be "at least" this amount, so you never know what may happen, come Budget day.

The Government has thus laid out what it calls a "lifecycle approach", detailing ways in which we can save, tax free throughout our lives - starting with the Child Trust Fund, moving through to ISAs and then pensions. It is hoped that this simplification of the ISA will encourage more of us to save, tax-free and build a "culture of savings" in the UK. What's more, it is also expected that this new, simpler system will "make ISA productscheaper and easier for the Industry to provide". Good news for us!

It should certainly make each of us think carefully about our saving strategy and in particular, assess whether we're saving enough. With ISAs here to stay we should make the most of saving tax-free - speaking of which, there are less than 5 months to go to use up this year's allowance!

Learn about ISAs, Child Trust Funds and Pensions